Market Trends and the Digital Business Landscape: Interview with Greg Elfrink of Empire Flippers

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If you own an online business that you’d like to sell someday, or if you’re considering buying an online business, this interview with Greg Elfrink, Director of Marketing at Empire Flippers, is a must-read.

In the interview, Greg discusses the challenges and opportunities for buyers and sellers in today’s market. From understanding the impact of Google’s algorithm updates on different online business models to navigating the complexities of deal structures and seller financing, there’s a lot covered here. Greg’s role provides him with an excellent perspective and plenty of insight that’s worthwhile for anyone looking to grow an online business.

How would you describe the current market conditions for those looking to buy or sell an online business in 2024?

It is a tough market right now to sell a business. Though, it is still a good market as far as actual sales multiples go. There was a big hangover crash that happened in 2022 and was fully realized in 2023 where many acquisition funds went belly up. Buyers have come back now to acquire digital businesses, but they are a lot more careful with how they structure their deals and far pickier on which businesses they decide to buy today versus even two years ago.

Buyers are heavily focusing on high-quality, growing businesses these days, ideally where you control the entire customer lifecycle and data like how you would with a direct-to-consumer e-commerce store, a marketing agency, or a SaaS.

Google’s algorithm updates have devastated many content sites over the past year but have had a smaller impact on e-commerce, SaaS, and other business models. What trends have you seen in buyers’ demand for the different business models that Empire Flippers works with?

This holds true from what I am seeing. I think the trends for content sites are likely to stay down as Google does a constant implosion as their panic response to AI. Google has always somewhat disliked content sites, and now they’re really showing their teeth.

My advice for everyone in the content space is to either sell those businesses now or level up your revenue model to e-commerce, SaaS, or another business model.

A large swathe of people still buying content sites from us right now are doing exactly this.

Content sites are great, but they have the best traffic in the world (SEO) combined with one of the worst revenue models (affiliate and display ads).

What should a website owner focus on if they’re interested in selling but traffic and revenue are trending down?

It’s an extremely difficult market right now to sell a business that’s trending down. It’s always hard to sell a distressed business, but especially now. My advice is to try to sell at a very low multiple. You will likely have to walk away with a lower amount of money upfront with the rest paid out over some period of time (usually a year).

There are still buyers willing to look, but they won’t pay nearly as easily for them as in the past.

What trends or characteristics have you noticed in the online businesses generating the most interest and selling right now?

Right now the two main business models I see buyers are hungry for are marketing agencies and direct-to-consumer e-commerce stores (not dropshipping). I think these businesses will be pretty stable for the long haul in the age of AI and a schizophrenic Google.

They both can use multichannel marketing, own customer data, and have great amounts of leverage they can utilize as they grow.

With seller financing being more common in acquisitions today than it was just a few years ago, what should buyers and sellers keep in mind?

At the end of the day, sellers need to be more flexible if they’re looking for a life-changing exit. A good offer today isn’t a good offer two years ago when capital was cheap. However, it will be a very long time, perhaps several business lifecycles before cheap capital becomes a thing again. That era was largely aberrant, not normal.

If a seller wants to get those juicy 7-figure exits, then they will simply need to be more open to buyer terms.

On the flip side, this is great news for buyers who wish to mitigate capital risk via deal structuring. Despite this, buyers still need to take into account what a seller really wants and really needs.

At the end of the day, the best deals should be win-win for both the buyer and the seller.

What are the most important factors buyers should consider when evaluating an online business in today’s market?

Many factors will change based on the business a buyer is looking at, but some things to consider are:

1. Acquisition budget – How much funds do you really have to acquire a business?
2. Working capital – How much money is left over post-acquisition to grow and maintain the business? For newbie buyers, it’s important to remember you’re not done putting money into the business post-acquisition. You’re just getting started.
3. Personal skills – What skills do you have as a buyer that make this acquisition make sense? Are you good at SEO? PPC? Maybe you’re a wizard at project management. I always advise acquiring where the business can benefit from your skills.
4. Strategy and Exit Plans  – Before buying a business, you should have a good strategy in place on what you’re going to actually do with that business. Break it down into a yearly strategy, then quarterly, then monthly, and then define your weekly tasks. While you don’t have to be this granular, this will help be your guiding light to master the chaos of business. Also, you should have a few exit plans in place before even buying the business. We have many customers who buy from us and then sell that same business through us 1-3 years later for example.

Currently, there are plenty of opportunities for buyers, but also risks that must be considered. What’s your advice for buyers who recognize the opportunity but are also concerned about potential risks?

I always tell buyers, you should never buy something where you can’t afford to lose 100% of the investment. No matter how solid or how quality a business is, nothing is risk-free. Anyone telling you otherwise, is either naive or lying. 

Business is risky, this is also why there’s such a massive upside potential in business versus other investment vehicles due to this risk.

Other than this mindset, I highly recommend buyers study and learn a variety of M&A deal structures. While you can’t mitigate the risk of all your capital, you can stack the cards in your favor protecting some of that capital through an effective deal structure such as earn-outs, stabilization payments, and so on.

What advice do you have for those who may want to sell their business in a year or two? What should they focus on now?

They should make a plan today.

It’s very common for entrepreneurs to believe their business is worth a lot more than it actually is. I see it all the time. If the plan is to sell in a year or two, that’s not a very long timeline to make the changes required to hit their valuation goals. 

Since the business’s actual value and the entrepreneur’s exit goals are often misaligned, it makes a TON of sense to reach out to someone like us who can help make a real exit plan based on a real valuation.

Don’t let yourself get a shocking surprise at the end of that 2-year period.

Work with an M&A advisor like us to make sure you’re on the right track with your goals.

What are some common mistakes sellers make that can negatively impact their business’s saleability or valuation?

The biggest is taking their foot off the gas. When a seller puts their business up for sale, they often already have “sold it” in their own mind. This means they’re not giving the care their business once got, and thus their business starts dwindling, which makes it much harder to sell.

Run the business as if you’re not selling it, even though you are.

Another common mistake is sellers want to “squeeze the juice” out of the business. This means they hold onto it to grow it for longer thinking they’ll get a better valuation.

This often doesn’t work out in reality.

The best time to sell your business is while you’re growing, not after. Buyers buy growth; they don’t like buying stagnation, and their offers will reflect that, giving you a lower overall multiple with more aggressive terms.

The best and easiest time to sell your business for the highest multiple is while you are in that growth phase. There’s a lot of urgency and scarcity, which forces buyers to act now and give you the best possible offers.

Are there any emerging trends or business models that you believe will become more popular among buyers in the near future?

I think faceless YouTube channels will become very popular for those looking to build or buy a side hustle. We’re already seeing it on our marketplace. All the chaos right now with SEO niche websites is likely channeling more energy into creating faceless YouTube channels.

I don’t think this model will fully fill the hole of niche sites, but it will rise in popularity.

I also think AI companies will flourish—but only for a short while. For people building those companies, my advice is either raise more money than you think you need or grow it insanely fast so you can sell it very quickly (less than two years of building).

The market is moving so fast there that many entrepreneurs will find themselves at the helm of an obsolete startup that can’t properly exit. So I would actually advise against going down that trendy model unless you have a very solid plan.

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